The index is stuck in a tight range near the top, the high at 7565.1 remains intact but the FTSE 100 has yet to decline.
The index is ready to decline but the pound and the S&P are supporting the FTSE. For some reason and against the odds GBP/USD is not rallying and the S&P is not falling at the same time. This behaviour is about to change, at least I expect a decline in the S&P but it’s not clear if GBP/USD will rally.
The trend in GBP/USD appears to have turned down. Yesterday’s news that CPI inflation is at 3% failed to push the pound higher, it seems the prospect of a rate hike in the UK is priced in. The latest rally to 1.3337 in GBP/USD is also in three waves, an indication the rally probably ended at 1.3337. We have more UK news at 9.30 today, we have the latest average earnings index, a strong number above 2.1% would be bullish for GBP/USD and bearish for FTSE.
The FTSE is ready to decline but each time a decline starts, positive influence from the pound or the S&P makes it rally again. We are seeing this again this morning, the index declined sharply into the close yesterday, now it’s back to 7540. This pattern has created some overlapping waves from the top at 7565.1. The trend is up in the FTSE but if the S&P decline starts today as I suspect, it will push the FTSE sharply lower. This is not a time to go long on FTSE.
The S&P rallied to a new high again, the pattern inside wave v is still an ending diagonal. An ending diagonal is a bearish pattern, it is the final move up, this is why there is a risk the S&P will sell off and this will drag the FTSE lower.